In this Unit Two video, we're going to discuss the degrees of inflation. Deflation  is the first topic that we will discuss. Now we're going to rank these from low to  high, right? So deflation refers to a decrease in the average price level of goods  and services over time. If the consumer price index, which shows if the price has gone up from year to year or gone down, if the CPI for one year is smaller than  from the previous year, then inflation rate will be negative. So, if the price, if for  one year is smaller than from the previous year, then the inflation rate will be  negative. So, if prices haven't increased as much as they did on a percentage  basis from the year before, the inflation rate will be negative. So, let's say in  2015, you know, prices were $10.50, but then in 2016, prices were $12.50. So  from 2015 to 2016, inflation has increased quite a bit from the year previous.  Now let's look at a low inflation environment. Inflation rates between zero and  5% are considered to be low and stable. This is the desired range for most  countries. Consumers will feel confidence in future prices if the range of inflation is between zero and 5% We don't want to see inflation get too high, 10-15-20%  You know, consumers will get very anxious at this time, and they think that you  know prices are going way too high. That the government needs to come in and  rein in their fiscal policy or their monetary policy in order to control inflation. A lot  of times, that'll be done with interest rates. As you know, inflation goes up, you  know, interest rates need to go down in order to bring that back into balance.  Now, firms and households can invest, spend, and save without fear of the  future erosion of the value of savings and investments. If we are in, if an  economy is in a low inflation environment, which is zero to 5% inflation rates  greater than 5% are considered high. Firms and households will rush to spend  their money now for fear of higher prices in the future. So let's buy goods and  services now if inflation is high, so that we will preserve the value of our cash in  the future, the race to spend money causes aggregate demand to grow rapidly.  That'll just be a short-term infusion or a short-term bump in demand and  aggregate demand if inflation rates continue to rise. This Causes demand from  inflation, reduces real income, and creates instability across the economy. So  we want to avoid high inflationary environment as much as possible. It will really  erode away the consumers' ability to find value in the goods and services that  they are buying, because inflation is too high, prices are moving up too quickly,  and people are seeing the value of their currency go down or diminish because  then they can buy less because prices are rising so rapidly because inflation is  not under control, but at a zero to 5% mark in inflation is considered to be low  and stable as this is low inflation, and consumers will feel confident about that  range of inflation as they feel that their value and their currency will still be the  same or near the same year over year. 



Modifié le: vendredi 18 septembre 2026, 08:05